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Finance and Public Administration Legislation Committee - 28/02/2014 - Estimates - CROSS-PORTFOLIO INDIGENOUS MATTERS - Indigenous Land Corporation

Indigenous Land Corporation

[11:06]

CHAIR: Welcome. Mr Dillon, would you like to make an opening statement?

Mr Dillon : No, thank you.

Senator McLUCAS: Mr Dillon, when the ILC last appeared before this committee, in November, there was some discussion about correspondence between the ILC and former ministers. My recollection is that the ILC took on notice the question of whether letters from former ministers Wong and Macklin warning the ILC against the purchase of Ayers Rock Resort could be tabled. We received an answer which gave a table listing letters, but I am very keen to see a copy of those letters. Do you have them with you and can you table them, please?

Mr Dillon : I have them available and I am prepared to table them.

CHAIR: As there is no objection to those documents being tabled, it is so ordered.

Senator McLUCAS: Thank you for that; I look forward to reading those. In the November hearing the committee also heard evidence that the ILC chair had expressed concerns about the due diligence process used by the previous board in purchasing the Ayers Rock Resort and had asked for a public inquiry by the Parliamentary Joint Committee of Public Accounts and Audit. Can you advise who the ILC chair approached requesting a public inquiry?

Mr Dillon : There were a range of letters to the government seeking, amongst other things, a parliamentary inquiry. The corporation has written, since the change of government, quite a number of letters to the government. The letters that seek a parliamentary inquiry, from memory, are as follows. There was a letter to the Prime Minister dated 14 November 2013; a following letter to the Prime Minister dated 16 December 2013; and a letter on the same date, 16 December 2013—the same letter, essentially—to the minister, Senator Scullion. Then, on 5 January 2014, the chair of the corporation wrote to Minister Scullion, again seeking a parliamentary inquiry. On 8 January, three days later, she wrote to the Prime Minister; the parliamentary secretary, Mr Tudge; and the Finance minister, attaching her letter to Senator Scullion of three days earlier, again seeking a parliamentary inquiry. We have, in response, received from Senator Scullion two letters, on 16 December and 20 December, where he indicated that he was writing on behalf of the Prime Minister and the government did not propose to proceed with a parliamentary inquiry into the issues raised at that previous hearing. I should provide some context.

Senator McLUCAS: Please.

Mr Dillon : Things have moved on a bit since much of that correspondence was written, because you will recall the corporation was requested to undertake an end-to-end review of the events surrounding the acquisition, and that review was initiated. There are two components to the review. It is a little bit counterintuitive, but the first component is looking forward, and that is yet to be completed but a draft has been received. The second component looked back at the acquisition, and that was completed first. That was released in December 2013. It is available on the ILC's website. But that review raises, and confirms in many respects, many of the concerns raised in correspondence to ministers.

In response to Minister Scullion's letter indicating that the government did not propose to undertake a review, the chair wrote and made the point that there were a series of unanswered questions that still required consideration and answers. They go to fundamental issues about accountability for the use of government funds, appropriate behaviour of directors and officers of a Commonwealth statutory corporation, due process and transparency. So there are a whole host of issues there. This is a very complex series of events—and I apologise for its complexity; I am doing my best to synthesise it down to headlines.

CHAIR: Thank you, Mr Dillon. You would be conscious that we have a very, very tight time frame, so anything you can do in regard to conciseness would be much appreciated.

Senator McLUCAS: Mr Dillon, you said that Minister Scullion responded to you in December of last year. I take your point that things have moved on since then, but is it appropriate for you to table that answer to the correspondence from the ILC? I might seek Ms Carroll's guidance here too.

Ms Carroll : We do not have copy of that correspondence with us, Senator.

Senator McLUCAS: Mr Dillon, do you?

Mr Dillon : Yes, I have a copy of the correspondence. The department would have access to the letter, I think.

Ms Carroll : Yes. We have it but we do not have it with us.

Senator McLUCAS: But it would be in order to table that correspondence?

Ms Carroll : We will take that on notice.

Senator McLUCAS: All right. We will seek your advice about tabling it and then, if that is in order, you can advise the ILC to table that.

Ms Carroll : Yes.

Mr Dillon : Just for clarity, that letter is dated 5 January 2014—to assist my colleagues from the department.

Senator McLUCAS: Then I would take you, Mr Dillon, to the end-to-end review. My recollection is that that is the McGrathNichol report. Is that correct?

Mr Dillon : That is correct. That is component 2 of the McGrathNichol report.

Senator McLUCAS: Right. And I think you said that the forward-looking part of the work is still in draft—

Mr Dillon : That is right.

Senator McLUCAS: but the backward-looking report—that doesn't sound very good!—the rear-view report, was published. Can you take the committee through the findings of the review in relation to the purchase of the resort and particularly the board's due diligence process?

Mr Dillon : The previous board spent $6 million on due diligence. There are hundreds, if not thousands, of pages on that due diligence into the acquisition. I cannot really summarise that but the McGrathNicol report went through all these documents in great detail. There are 25 headline findings of concern. I can table a document that lists those. I might just pick up the top six or seven.

To contextualise this, as I reported at the last estimates, the board purchased this asset for around $300 million. The asset has been written down already by $62 million. It is now worth $250 million. We are doing a further evaluation at the moment which may lead to a further write-down. It is clear the board paid too much for this asset—potentially between $50 million and $100 million too much. In addition, the board took out borrowings—debt finance—for the acquisition. The outstanding debt that the ILC is carrying in a consolidated fashion is close to $200 million. The justification to the board by the director who drove the negotiations was that the asset would cover the debt repayments and the repayment of the principal in due course. The projections that went to support that have not been met since the acquisition took place. Now, to go to the findings—

CHAIR: Mr Dillon, it is important to be concise. I do not think it ought distract from your argument but if you could be concise in response to Senator McLucas's questions that would be much appreciated.

Mr Dillon : I am being precisely concise.

CHAIR: Excuse me, if you could be as concise as you can that would be much appreciated.

Mr Dillon : The first point to note from McGrathNicol was that the CBRE valuation that the board had available to it when it made the acquisition was 17 months old. McGrathNicol did some calculations. They indicated that had they had an up-to-date valuation the value of the resort would have been in the order of $250 million—not $300 million. That goes to the point of paying too much. A further key finding was that the due diligence, which cost over $6 million was on a success-fee basis. There was no appropriate selection processes around the selection of due diligence consultants. Grant Samuel received one per cent of the purchase price, which—

Senator SESELJA: So the higher the purchase price the more the person would receive?

Mr Dillon : Absolutely.

Senator SIEWERT: Is that usual? I am not an expert on due diligence but—

Mr Dillon : We understand there are precedents in the industry about this but—

Senator McKENZIE: Which industry?

Mr Dillon : The due diligence industry for real estate acquisitions—hotel acquisitions.

Senator SESELJA: It was effectively an incentive for the individual or company to value it at a higher rate because they would get more of a success fee.

Mr Dillon : Exactly. That is the concern that McGrathNicol raised.

Senator SIEWERT: It is bizarre.

Mr Dillon : We are not talking about a small amount of money. The purchase price was $300 million so the fee was $3 million. The cheque was written—

Senator SESELJA: Was that part of the $6 million that you are talking about—the success fee of $3 million?

Mr Dillon : The $3 million was part of the $6 million that was spent. Another headline finding from McGrathNicol was that capital expenditure projections used in the modelling were based on essential capital expenditure only, whereas the projections, going forward, projected optimistic occupancy rates going forward. To get those occupancy rates you require not just the minimal level of capital expenditure but you need to maintain the asset going forward. The Yulara resort is complex of five hotels. It is a small town. So it is a big financial exercise. McGrathNicol found that the occupancy projections appeared to be 'overly optimistic'. They were projected to grow, notwithstanding a long-term decline in visitation.

CHAIR: Excuse me, Mr Dillon, Senator McLucas. We do have questions from other senators in regard to the ILC on other issues, not particularly this one. We are also going to deal with Indigenous Business Australia and I am conscious of keeping on time. If at any point you think you might be able to direct the responses by way of questions, that would be helpful.

Senator McLUCAS: Thank you for your kindness, Chair. Mr Dillon, you said you also have the recommendations—I think you said there were 24?

Mr Dillon : Twenty-five.

Senator McLUCAS: Twenty-five recommendations from the report. To accommodate the chair's reasonable request, if you tabled those recommendations—and you did say that report is available somewhere.

Mr Dillon : On the ILC website. Here I have summarised the 25 key concerns—they are not recommendations. We have extracted them from the report.

Senator McKENZIE: Just to be clear, they are not recommendations.

Mr Dillon : They are key findings.

Senator McKENZIE: In the key finding around the decision, which seems to be not an advisable decision to have made—

Senator SESELJA: That is an understatement, Senator McKenzie.

Senator McKENZIE: Were there any outcomes related to Indigenous employment, around how the resort would work?

Mr Dillon : When the resort was acquired, it employed two Aboriginal persons. In the period since 2010, that number has gone to just under 200 Aboriginal employees and trainees. So it is an extraordinary success. The resort is managed exceptionally well. There is a lot of debate about whether the ILC has, in a sense, denigrated the resort. The ILC has not. We believe the resort is exceptionally well managed and the ILC itself, over and above the purchase price in the last 2½ years has invested over $9 million in Indigenous employment at the resort. It is a huge success story. The minister himself has been on the front page of the Australian extolling the benefits. We are all on the same page here. The current ILC board has done a terrific job in driving Indigenous employment. The vision was with the previous board. No-one disputes that, but that is not the real issue here. The real issue is the ILC, a statutory corporation, purchased an asset for 300 million which was probably worth just over 200 million and borrowed way beyond its financial capacity to repay. The ILC will live with the consequences for the next 10 or 20 years.

Senator SIEWERT: And the consequences are?

Mr Dillon : The consequences are that the interest repayments are around 11 million a year and, were we to pay down the 200 million at 10 million a year that would take us 20 years. So there you go: $20 million a year for the next 20 years, roughly.

Senator SIEWERT: That is overall?

Mr Dillon : Back of the envelope—out of a $50 million budget from the land count, so basically 40 per cent of our funding. I should qualify this because, if we can trade out of this—

Senator McKENZIE: I have other questions.

CHAIR: Thank you.

Senator McLUCAS: This is actually the answer.

Senator McKenzie: Is this—

CHAIR: Excuse me, Senator McKenzie. There has been lots of information in Mr Dillon's presentation. Much of it is difficult for people to digest if there is no opportunity for other questions. Senator McLucas, can you ask Mr Dillon a question because other senators do have questions on other issues for the Indigenous Land Council?

Senator McLUCAS: I note you have made changes to the Audit and Risk Management Committee. There was some commentary about that as well. I also note that the minister, in his role as the shadow minister, was critical of changes to the audit management committee. I think you have given us a context as to why the audit management committee had to be reviewed. Can you confirm, in a short sentence, why the ILC changed their—

Mr Dillon : The audit risk committee should have had a key role in over sighting the transaction. The transaction was driven by Director Baffsky. Director Baffksy chaired the Audit and Risk Management Committee. The review notes that the audit and risk committee did not give adequate attention to the transaction. Director Baffsky had been on the audit and risk committee—I do not have the exact figure—for somewhere in excess of 10 years. The Audit Office guidelines say two terms, five years or thereabouts, and another member of the audit and risk committee, Director Jeffries, had been on the audit and risk committee for nine years. So the committee had been locked in place for too long, and the review found that that was a key corporate governance issue that the ILC should address. Of course, when the new board was appointed in October 2011, they immediately took action to renew the audit committee. That was when, suddenly, conflict emerged within the board.

CHAIR: I need your consent to table a document, Mr Dillon; it is the recommendations.

Senator Scullion: Just for clarity, Mr Chairman, the actual report and its recommendations were tabled on 18 December, so they are available on the public record.

Senator SIEWERT: Minister, I just missed where you said they were tabled.

Senator Scullion: They were tabled on the ILC website on 18 December.

CHAIR: Senator Siewert, do you have any questions of the ILC in regard to this specific issue?

Senator SIEWERT: Senator McLucas is asking questions that I might following up on. So if I need clarity I will throw something in.

CHAIR: Senator McLucas, I would like to go to Senator McKenzie at 11.30 and then come back to you.

Senator SIEWERT: Chair, can I clarify: will we get copies of the letters that Mr Dillon tabled?

CHAIR: Yes, they are being photocopied now.

Senator McLUCAS: I want to go to another inquiry. Last month there was a media report referring to another review of the purchase of the Ayers Rock Resort, which had been conducted by Aegis Consulting Group. My understanding—and I can be corrected—is that this report was commissioned by previous ILC board and Voyages board directors. Did the ILC pay for this report?

Mr Dillon : Senator, the answer is no.

Senator McLUCAS: I then assumed that this was paid for in their personal capacity—but you would not know the answer to that. Are you aware of that report?

Mr Dillon : I am only aware of it by virtue of the media reports.

Senator McLUCAS: Do you know why the report was commissioned? You might not be able to answer that question.

Mr Dillon : No, I do not know why the report was commissioned. There was no contact with the ILC regarding the report, seeking information—nothing.

Ms Carroll : Senator, perhaps the department has been provided with a copy of that report as has the Department of Finance, and we are currently considering the report.

Senator McLUCAS: It is not yours to publish though, is it?

Ms Carroll : No, Senator.

Senator McLUCAS: Do you know who commissioned it, Ms Carroll?

Ms Carroll : I will just have to check if I have got that specific information.

Senator McLUCAS: Could you also find out, if you can, who paid for this report and why it was commissioned.

Ms Carroll : I would not be able to tell you why it was commissioned. All I can tell you is that it was provided to the department.

Ms Edwards : Senator, I am informed that on the face of the report it is not clear exactly who commissioned it.

Senator McLUCAS: So the department has it at the moment. Has it been provided to the minister at this point?

Ms Edwards : It was provided to the department under a direct letter.

Senator McLUCAS: Have you provided it to the minister?

Ms Carroll : Not at this stage. We are talking to the Department of Finance about it.

Senator McLUCAS: Minister, have you seen the report?

Senator Scullion: No, I have not seen the report, but I am aware of its existence.

Senator McLUCAS: Simply through media commentary?

Senator Scullion: Yes, it first came to my attention through media commentary, but I am also aware of its existence through conversations with the department—'Where is it up to?' sort of thing, and they said it was with Finance.

Senator McLUCAS: Have you had other advice—

Senator Scullion: I have not had any other briefings or advice in regard to—

Senator McLUCAS: or conversations with other people about the report?

Senator Scullion: No, I have not.

Senator McLUCAS: Chair, my next question moves along a little bit.

CHAIR: It being 11.30, I would like to go to Senator McKenzie and then we will come back.

Senator McLUCAS: Okay. But I do have further questions.

CHAIR: Senator McKenzie, on the Indigenous land council.

Senator McKENZIE: My question relates to the Northern Territory land councils and the Aboriginals Benefit Account. Could you outline for me the increase in Commonwealth funding over the last five financial years, please?

Ms Edwards : Can we just clarify—we are in the section talking about the Indigenous Land Corporation. I am not clear on the question. Could you repeat it?

Senator McKENZIE: That question might be more appropriate for PM&C—is that right?

Ms Edwards : Yes.

Senator McKENZIE: My apologies. I have a question for ILC around the acquisition of the Koori Job Ready program. Can you confirm that the National Centre of Indigenous Excellence Board approved, around June 2013, a $50,000 per annum pay rise to its CEO, backdated for a year? What was the basis of that approval?

Mr Dillon : I cannot confirm that, but I am happy to take it on notice.

Senator McKENZIE: Okay. Was the ILC Board informed of the acquisition of the National Centre of Indigenous Excellence of Koori Job Ready from the CFMEU?

Mr Dillon : I do not think this was an acquisition from the CFMEU.

Senator McKENZIE: It was purchased from the CFMEU. It was an acquisition by NCIE of Koori Job Ready. That program was acquired from the CFMEU. I want to know what the board knew about the acquisition and I want to know when they knew it, and then I want to go to the approval processes.

Mr Dillon : I think we need to get some clarity about what it is that happened.

Senator McKENZIE: I would appreciate that.

Mr Dillon : This was not an acquisition of anything. The NCIE, which is a wholly owned subsidiary of the ILC, took over a program that was previously run by the New South Wales government. It is an employment program for Indigenous staff. It is very similar to the National Indigenous Training Academy that we run at Ayers Rock but it works with local people in New South Wales particularly. Koori Job Ready was a program that was created in 2006 by the New South Wales government. It was previously located at the Australian Technology Park in Sydney, in my understanding.

It has been funded with Commonwealth money from IEP and also with New South Wales government money. NCIE took this program over. The two programs are the Les Tobler centre for construction industry training and the Yaama Dhiyaan program for the hospitality industry. It provides an integrated solution for people seeking training and provides assistance in finding and maintaining employment. There was no acquisition; there was just a transfer of the program, if you like. It was previously auspiced by the New South Wales government. It then went to the NCIE with New South Wales government funding and ongoing Commonwealth funding.

Senator McKENZIE: When did that occur?

Mr Dillon : That occurred last year.

Senator McKENZIE: Month?

Mr Dillon : So—

Senator McKENZIE: What date did that change of auspicing arrangements—

Mr Dillon : It was 1 October 2013.

Senator McKENZIE: When was the board made aware of the change in auspicing arrangements?

Mr Dillon : Which board—the NCIE Board or the ILC Board?

Senator McKENZIE: ILC.

Mr Dillon : I would have to take that on notice. It was probably around that time.

Senator McKENZIE: Before or after the—

Mr Dillon : Before.

Senator McKENZIE: It was made aware before—

Mr Dillon : Yes; that is my understanding.

Senator McKENZIE: of the change in auspicing arrangements?

Mr Dillon : I would like to check it. My understanding is that it was before, but I will check that for you.

Senator McKENZIE: What were the approval processes of deciding to actually start auspicing this program?

Mr Dillon : They would have been undertaken by NCIE. They would have had discussions with the New South Wales government and done some assessment as to what was involved. And I was—

Senator McKENZIE: And then what would have happened?

Mr Dillon : I was not privy to those discussions.

Senator McKENZIE: So NCIE decides that they do not longer want to be auspiced by the New South Wales government?

Mr Dillon : No. Koori Job Ready, which was its employment program, was under the New South Wales government, and it came under NCIE.

Senator McKENZIE: Right. So the NCIE made the decision?

Mr Dillon : That is right.

Senator McKENZIE: That 'We want to go and auspice this program'?

Mr Dillon : Exactly.

Senator McKENZIE: And then went to the ILC for approval of that?

Mr Dillon : That is right.

Senator McKENZIE: Before the auspice arrangements changed. Okay. We were talking about the $6 million done earlier: what due diligence was undertaken by NCIE prior to the acquisition?

Mr Dillon : I would have to take that on notice.

Senator McKENZIE: We had $6 million from an acquisition that we heard a great deal about over the last half an hour, but we do not have any idea about the due diligence that was done by NCIE around the change of an auspicing arrangement that they clearly had discussions about. You will take it on notice?

Mr Dillon : Well, I was not privy to discussions, so do not wish to chance my arm and say things that I do not know anything about. So I guess I will have to take it on notice.

Senator McKENZIE: Was there any due diligence undertaken by the ILC, then?

Mr Dillon : No. The ILC has subsequently had a look at it in an informal way—the transfer of this responsibility—the reason being that because NCIE is a fully-owned subsidiary, we, in a sense, stand behind them. And—

Senator McKENZIE: Yes, you back them.

Mr Dillon : We back them, and so we want to get a handle on what the ongoing liabilities are here.

Senator McKENZIE: Would it not have been useful to know that before the decision was taken to auspice it—to have an understanding of liabilities? We have had a big debate over the last half hour about decisions around taking on liabilities. This is quite a recent decision to take on more liabilities, but we did not do any assessment as to what they might be.

Mr Dillon : When I talk about liabilities, I am really talking about—

Senator McKENZIE: Yes, I would like to know what you see them as.

Mr Dillon : I am really talking about recurrent funding—the wages, the whatever.

Senator McKENZIE: Do we have an understanding of what the magnitude of that might be?

Mr Dillon : One, we are not talking assets; we are talking an intangible program that is located in Redfern. But the funding here is in the hundreds of thousands, not the hundreds of millions. So to compare the two discussions, I think, is slightly—

Senator McKENZIE: It goes to the principle, surely? We are talking about recommendations around governance, and if you get the governance right it does not matter if you are talking pennies or pounds—good decision making is good decision making.

Mr Dillon : Absolutely, I could not agree with you more.

Senator McKENZIE: All right. I am aware that Rohan Tobler, the NCIE general manager, was formerly employed by Koori Job Ready. Is that correct?

Mr Dillon : It sounds correct to me, but I would have to check and take it on notice.

Senator McKENZIE: Correct, and also the CFMEU? Did he personally advocate for the Koori Job Network's acquisition? Could you outline the conversations that may have been had by Mr Tobler around this issue?

Mr Dillon : I do not have any knowledge of any conversations.

Senator McKENZIE: Okay. Does the NCIE and the ILC have any liabilities relating to the unfortunate death of the 23-year-old Indigenous man on 9 January 2014 at the Barangaroo construction site in Sydney?

Mr Dillon : My understanding is that the answer is 'no'.

Senator McKENZIE: Your understanding is that the answer is 'no'?

Mr Dillon : Because the person was not employed by NCIE or Koori Job Ready. He was a previous trainee of Koori Job Ready.

Senator McKENZIE: Right. He was then placed to work in Active Labour after his pre-employment training. Is that right?

According to the ABC's 7.30, Active Labour is a company that has been reported to associate with outlaw biking gangs such as the Comancheros. Is that true?

Mr Dillon : I do not know.

Senator LUNDY: Chair, she is impugning associations, and I think it is unreasonable.

Senator McKENZIE: No, I am actually reporting on the report of the ABC's 7.30.

Senator LUNDY: Yes, but the tone of your question is impugning something when it is just speculative.

CHAIR: Order! If I heard Senator McKenzie's question correctly, she was making reference to an ABC media report.

Senator McKENZIE: How does the acquisition of Koori Job Ready relate to the ILC's function, given that, as you said earlier, it is located in Redfern—it is not on Indigenous held land? And, if there is no relation to the ILC's land management function, was the purchase contrary to the ILC's statutory remit?

Mr Dillon : There was no purchase of an asset. We took over a program.

Senator McKENZIE: With recurrent funding liabilities.

Mr Dillon : That is right. The NCIE operates from a site in Redfern. It has a broad remit to work with the Redfern community and has broad support from the community. Koori Job Ready has a location in Redfern and NCIE—

Senator McKENZIE: Yes, you have said that. My question—let me make sure you are really clear on what it is—was whether it has no relation to the ILC's function, specifically the ILC's remit with land management function. If it does not, is the decision to auspice this body therefore contrary to the ILC's statutory remit?

Mr Dillon : I have not taken legal advice on this.

Senator McKENZIE: Could you?

Mr Dillon : I would just point out that I operate out of a leased office here in Deakin. It is not Aboriginal owned land but it is within our statutory functions for me to operate out of that office. So I think—

Senator McKENZIE: You are the CEO; you are not running an employment program.

Mr Dillon : It is the same in that it is ILC operations. There has to be a link to Aboriginal land, but only a broad link, not a direct link. I think, if we did seek legal advice, we would find that there was a broad link.

Senator McKENZIE: My final question goes to an earlier question I asked Ms Carroll. Seeing that you are at the table, you might be able to clarify whether or not you are a friend, former colleague and co-author of a book—

Senator McLUCAS: Chair, that is out of order.

Senator McKENZIE: with the chairman of the MJD Foundation, Mr Westbury.

CHAIR: I think that question might have been asked of Ms Carroll earlier.

Senator McKENZIE: And they took it on notice. Seeing he is here, I thought I would ask him.

Senator McLUCAS: You are continuing this line of impugning the reputation of various persons. We have seen that before—

Senator McKENZIE: If I co-authored a book with someone and was a former colleague and friend of theirs, I would be happy to state that that was the case.

Senator McLUCAS: Well, you are talking to the CEO of the ILC in his capacity as the CEO of the ILC—

Senator McKENZIE: In your capacity—

Senator McLUCAS: You might want to ask everyone else if they have a friend as well!

CHAIR: Excuse me, Senators. Mr Dillon, in earlier evidence, the Department of the Prime Minister and Cabinet said that they would take that question on notice. Would you like to answer the question or take it on notice?

Mr Dillon : I have not taken it on notice. It is not appropriate for me to in my role as ILC CEO. If the committee gives me permission to—

Senator McKENZIE: Did you co-author a book?

Mr Dillon : answer in my personal capacity—

CHAIR: Mr Dillon, would you like to answer Senator McKenzie's question—yes or no?

Mr Dillon : Only if I can speak in my personal capacity.

CHAIR: I will take that as a no. Thank you very much, Senator McKenzie. Before—

Senator Siewert interjecting

CHAIR: Excuse me! Before we go back to Senator McLucas, I want to get advice from Ms Carroll. The question that I heard Senator McKenzie asking with regard to the Northern Territory land council goes to the issue of the Aboriginals Benefit Account. Where is that best placed in today's program, or have we passed over it?

Ms Carroll : I think we have passed over it. Most of those questions happened in the first session.

CHAIR: My apologies, Senator McKenzie.

Ms Carroll : We will take that on notice.

Senator LUNDY: Chair, before we proceed, my colleagues are still concerned that Mr Dillon did not refuse to answer the question; he asked if he could speak in a personal capacity. Can I suggest that the committee have a brief private meeting at lunchtime to discuss this?

CHAIR: I am happy with that.

Senator LUNDY: Obviously there are concerns about the line of questioning and the way it was responded to.

CHAIR: We will have a private meeting. Senator McLucas.

Senator McLUCAS: I now want to go to the Ernst & Young review of the ILC and the IBA and some questions to the department. The minister announced a review of the ILC and the IBA in December last year and then announced that the review would be conducted by Ernst & Young. Was Ernst & Young selected through an open tender process?

Ms Edwards : Ernst & Young was selected from an existing panel of providers through the former department DEEWR, which came into PM&C. So we had access to that panel. That panel was put together through an open selection process.

Senator McLUCAS: How much will the review cost?

Ms Edwards : $300,000.

Senator McLUCAS: Who did the department and/or the minister consult on the terms of reference for that review?

Ms Carroll : The department consulted with the minister to finalise the terms of the review.

Senator McLUCAS: Were there any changes to the terms of reference during the course of the review?

Ms Edwards : No.

Senator McLUCAS: Minister?

Senator Scullion: Not that I am aware of.

Senator McLUCAS: The review was announced in December—and they started work when?

Ms Carroll : They started work in early December, as soon as the contractual arrangements were put in place.

Senator McLUCAS: When did submissions close?

Ms Edwards : 24 January.

Senator McLUCAS: It is always important to do reviews but it is always difficult over Christmas. What was the need for the haste with this review?

Ms Carroll : We did not want the review to drag on. While it started in December, certainly the consultants met with a wide range of people and also had the process for people to put in presentations to the review. We acknowledge that that happened over December and January, but there was a process by which people could put in public submissions.

Senator McLUCAS: Are you sure there was not a change to the terms of reference?

Ms Edwards : Yes.

Senator McLUCAS: Were there requests for extensions to the deadline for making submissions to the review, given that it was over the Christmas break?

Ms Edwards : I received a couple of informal calls for extensions—the ones that I am aware of were primarily from representatives of state governments. The answer given was, 'There isn't an opportunity for extending the deadline, but send us your material anyway.'

Senator McLUCAS: Was the material sent to the department and then passed on to Ernst and Young?

Ms Edwards : The public submission process material came to an email address that was set up, departmentally auspiced, and then provided to Ernst & Young.

Senator McLUCAS: How many people made submissions?

Ms Edwards : 26.

Senator McLUCAS: To break them into categories, how many were states and territories?

Ms Edwards : Very few. We can take that on notice. We think it was perhaps a couple.

Senator McLUCAS: That is a bit of a concern. Did those states and territories that expressed a desire to receive an extension actually send anything in?

Ms Edwards : One has.

Senator McLUCAS: Of the remaining 24 submissions to the review, how can they be categorised? I do not want to know the names of the submitters, but what sorts of organisations or individuals were they?

Mr Matthews : Broadly, they were from a wide range—native title representative bodies, private individuals and interested parties. They varied quite a bit. I would not say there was a general theme.

Senator McLUCAS: Will all those submissions be made public?

Ms Edwards : That is a matter for government.

Senator McLUCAS: I asked that question in another committee the other day and the answer I was given was that, because we did not tell the people when we asked for submissions that they were going to be made public, we cannot make them public. I am a little bit concerned about this theme that is appearing. I have not heard these sorts of answers previously.

Ms Carroll : What has happened in the past, certainly when I have been involved in processes like this, is that sometimes it is very explicit up-front that people's submissions will be made public and they often go on a website in a particular amount of time. When that has not been made public, what would normally happen is that, once the government has made a decision about what it wants to do with the review document, we would contact any of the people that made a submission and ask if they were happy for their submission to be released as part of that. That would be part of a general process.

Senator McLUCAS: Minister, do you want those submissions to be public?

Ms Carroll : In this instance some of the people who put in submissions expressly asked that their submissions not be made public. That is one of the reasons we did not make them public.

Senator McLUCAS: Absolutely, if someone says they want to tell you something but not be public, you do not publish that. Minister, in general do you want the submissions to be public?

Senator Scullion: I do not think we deal with this in a different way than the government would normally consider the reports. We would obviously have to consider whether people want them to be made public, or not. Invariably, the convention of government is to respect the wishes of people who want them published and those who do not. I imagine this would be no different.

Senator McLUCAS: You usually start from a position of publishing first unless someone says do not publish. That has historically been the view.

Senator Scullion: I think that is what my answer was. I just said the convention in the past was that you have to respect the wishes of those who do not want their submission published. But I do not have any intimate knowledge of that.

Senator McLUCAS: Has the report been received yet?

Ms Carroll : Yes.

Senator McLUCAS: When was that?

Ms Carroll : 17 February.

Senator McLUCAS: Where is it now?

Ms Carroll : The department has received it. We have had a look at the report and we have recently finished a brief to the minister. I do not think it has actually landed on his desk yet, but it is on its way.

Senator McLUCAS: And then you will make a decision, Minister, about when to publish?

Ms Carroll : That would be the normal process.

Senator McLUCAS: But that decision has not yet been made?

Senator Scullion: No.

Senator McLUCAS: Has any further work in the area of the review of the ILC and the IBA been commissioned from anyone else?

Ms Carroll : No. We have not gone out to commission any work outside of that.

Senator McLUCAS: Was the ILC consulted on the terms of reference before the review was announced?

Mr Dillon : Yes.

Senator McLUCAS: The terms of reference ask reviewers to consider 'how to structure arrangements to ensure appropriate powers of ministerial direction of government control'. How does that fit with the fundamental way the ILC was established historically? Frankly, I do not really understand that. My understanding is that the ILC is an independent entity. Frankly, there should be no ministerial intervention or government control. I want you to go to what your act says.

Mr Dillon : I think that is correct. The ILC was established in 1995 following the passage of the Native Title Act. The Native Title Act said there will be a Land Fund. In 1995, legislation was introduced to establish the ILC and the Land Fund, now known as the Land Account. In essence—and this is a major concern of the ILC board—this reflected the compact, the settlement, the grand bargain that was put in place following the passage of native title. In return for the resolution of native title claims across the country—the certainty given to non-Indigenous Australians—Aboriginal people got access to a claims process under the Native Title Act. But many Aboriginal and Torres Strait Islander people have lost access to their traditional lands. The government at the time took the view that there should be an extra mechanism that in a sense provided partial compensation for the lands that had been dispossessed. There was a grand compact—the so-called social justice package.

You will find that the Land Account funds the ILC. The ILC was established with a primarily Indigenous board. The idea was that Aboriginal and Torres Strait Islander people would allocate the proceeds of the Land Account in land related ways. Land management and land acquisition were the two primary functions of the ILC. The concern shared deeply by the ILC board is that this is being placed at risk by any suggestion of an amalgamation or greater ministerial control over the operations of either the ILC or the IBA—but particularly the ILC. The ILC is unique among Commonwealth statutory corporations. It has greater independence than most, if not all, for that very reason—that it was deliberately put in place as a compensatory mechanism.

Senator Scullion: Thank you, Mr Dillon. I would like to clarify something for the record. I would not want to have any confusion over the last iteration from the witness. The terms of reference specifically set aside any consideration of the Land Account so that those concerns did not arise. The review was not to consider any aspects of the Land Account because that was absolutely sacrosanct, as the evidence indicated. But they were in the terms of reference specifically to avoid the sorts of concerns just brought up by the witness.

Senator McLUCAS: I want to understand in both a legal and a practical sense what would be the effect on the Land Account—accommodating Minister's Scullion comments just then—

Senator McKENZIE: It was not part of the review.

Senator McLUCAS: I note that—and I note what the minister said.

Senator McKENZIE: Just clarifying.

Senator McLUCAS: What would be the effect on the Land Account of an amalgamation with the IBA in a legal sense and also in a practical sense?

Senator Scullion: This is normally a question that would be seen to be speculation, an opinion. There has been a comprehensive report to deal with all these matters. Whilst the witness has already given evidence, and certainly the ILC has given evidence, I do not think it is appropriate that we reiterate here what we are going to read in the report.

CHAIR: The minister's comments are quite insightful. If we could avoid speculation, that would be much appreciated.

Senator McLUCAS: It is not speculation. There has been commentary about the potential to amalgamate the ILC and the IBA.

CHAIR: I can only make a judgement on my interpretation of what I think I have heard. If we could steer clear of speculation, it would be much appreciated.

Senator McLUCAS: I have asked in a legal sense and in a practical sense, not a speculative sense.

CHAIR: But it is a hypothetical question, isn't it?

Senator McLUCAS: If the ILC and the IBA were to be amalgamated, what can we predict would be the complexity—

CHAIR: The speculation arises around the word 'were'.

Senator McLUCAS: No, this goes to due diligence. A government needs to think about what road they are walking down if they are going to contemplate amalgamating the ILC and the IBA. From my non-legal understanding, I am asking whether people have put their mind to the practical and legal implications in terms of the management of the Land Account—and I think that is a reasonable question.

CHAIR: Have you been asked to put your mind to the management of the Land Account?

Senator McLUCAS: If there was an amalgamation—

Senator Scullion: As I indicated earlier, certainly in terms of the context of questions about this review, the review specifically excised any questions of that nature because we wanted to embargo and quarantine the Land Account, and the mechanisms of the Land Account, from any changes that were possible. For that particular reason, we excised that. I certainly would not like the questions specifically about particular governance changes and amendments to how we went about business to be predicated on an opinion from the ILC or others.

Senator McLUCAS: Minister, if the ILC and the IBA were to be amalgamated, that would be quite legitimate. You know that there are many things that are delivered with funds from both the ILC and the IBA. The IBA will do the business end and the ILC will be doing some purchase work. I want to know how you construct an entity where the Land Fund is separate. I think that is a question we need to contemplate before we potentially go down the road of amalgamating these two entities.

Senator Scullion: That is not the question you were asking.

Ms Carroll : The terms of reference were trying to take into account the fact that the ILC and the IBA are different in their current powers et cetera and there is a range of options available. This was asking the review for some advice. It might be that the advice, and the decision of any government if there were to be a change, could be to leave things as they are or to make a change. So there is a range. The point of having it in the terms of reference was to seek some advice from Ernst & Young about the possibilities going forward, thinking about that and the consultation process that they went through. They spent an amount of time with the ILC and the IBA separately to think about, in any recommendations they brought forward, the implications and what would happen. There was a clear intent to surface that issue and understand the options going forward. As we have already indicated, we have only recently received the report and it is under consideration.

Senator McLUCAS: I will leave it at that, but I will look forward to receiving that report in the short term. I have some questions for the IBA but I will defer to others.

Proceedings suspended from 12:03 to 12:10

CHAIR: I would just like to note that the committee has had a private meeting and note that the witness did not refuse to respond to the question. The committee is keen to finalise this matter and will be in contact with the witness shortly.

Ms Carroll : Right at the beginning, Mr Dillon asked about tabling some letters for the minister. We have shown those letters to the minister. We are happy that they are tabled for the committee.

CHAIR: I call representatives of Indigenous Business Australia.